Broker Check
How Long To Save Tax Documents

How Long To Save Tax Documents

May 07, 2024

The duration for which you should retain a document relies on the action, expense, or event recorded in the document. Typically, you need to keep records that substantiate an income, deduction, or credit shown on your tax return until the period of limitations for that tax return concludes.

The "period of limitations" refers to when taxpayers can amend their tax returns to claim a refund or credit or during which the IRS can assess additional tax. Below is a summary of the periods of limitations that apply to income tax returns. Unless specified otherwise, the years mentioned refer to the period after the return was filed. If you file your return before the due date, it is considered filed on the due date.

It's commonly recommended to keep tax records for at least three years after the tax filing deadline. This includes documents supporting income, tax deductions, and credits claimed on your tax return.

The Internal Revenue Service (IRS) has the authority to commence an audit if an individual fails to report at least 25% of their income within a period of six years. This can happen more frequently in the case of businesses that receive multiple 1099 forms from their clients, as it is possible to overlook reporting one of them.

Although the recommended duration for saving your tax returns supporting documents is three years, I suggest keeping any document used to prepare your tax return for seven years. This way, you will be better prepared if the IRS has any questions about your input on your tax returns. Other issues may arise after three years from the filing date of the return. One example is writing off bad debt or a worthless stock. This type of write-off of the related documents should be held for at least seven years.

Examples of some documents to retain:

  • W2s
  • Investment income and sales – 1099Int, 1099Div, 1099B, K1, and others.
  • Mortgage interest – 1098
  • Statements for health savings accounts, tuition, etc.
  • IRA, Pension, Annuity withdrawals – 1099R
  • Canceled checks from charitable donations.
  • Social Security statements

 

Remember, if you use a digital storage system to store your documents, it is important to have a backup of this data.